Fixed rate financing instrument offering a dividend or partially guaranteed by third party to issuance, method for establishing a market for the same, method for directly public-offering the same on-line

ABSTRACT

A fixed rate financing instrument issued by a corporation, government, or other organization which pays a fixed interest rate and/or dividend as secured by an issuing entity&#39;s promise to pay and partially guaranteed by a third party to issuance. An operation financing system for public-offering the fixed rate financing instrument on-line directly by the issuing entity or for public-offering the fixed rate financing instrument through a direct purchase plan by the issuing entity. A method for forming a new market includes preparing the fixed rate financing instrument, public-offering the fixed rate financing instrument, delivering to a potential purchaser the financial disclosure as required by law, requesting the potential purchaser to acknowledge receipt and review of the financial disclosure as required by law, and confirming acknowledgement of the financial disclosure from the potential purchaser; and processing a requested transaction by retrieving information via a network to a server.

CROSS-REFERENCE TO RELATED APPLICATION

This application is a Divisional of U.S. application Ser. No. 11/148,406filed on Jun. 9, 2005, now U.S. Pat. No. 7,536,330 which is aContinuation-in-Part application of U.S. application Ser. Nos.10/233,995 filed on Aug. 30, 2002, now abandoned 10/358,432 filed onFeb. 4, 2003 now abandoned and 10/376,358 filed on Feb. 27, 2003 nowabandoned and 10/444,870 filed on May 23, 2003, now abandoned Priorityis claimed based U.S. application Ser. No. 11/148,406 filed on Jun. 9,2005, which is based on the parent U.S. application Ser. Nos. 10/233,995filed on Aug. 30, 2002, 10/358,432 filed on Feb. 4, 2003 and 10/376,358filed on Feb. 27, 2003 and 10/444,870 filed on May 23, 2003, which claimthe priority dates of Sep. 3, 2001, Feb. 5, 2002, Feb. 27, 2002, Mar.11, 2002, May 31, 2002, Sep. 3, 2002 and Feb. 4, 2003, the filing datesof Japanese Patent Application Nos. 2001-265178, 2002-27550, 2002-51085,2002-65123, 2002-158595, 2002-257497 and 2003-27127, respectively.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to fixed rate financing instruments issuedfor acquiring private funds and investments, offering a dividend orpartially guaranteed by third parties to issuance, i.e., personals orentities other than the issuers/grantors and buyers of the financinginstruments. The invention is also related to systems, servers, methods,programs and computer-readable recording media for establishing a marketfor the fixed rate financing instruments, and a method for directlyoffering the fixed rate financing instruments on-line. In particular,the financing instruments attract private funds and investments tofinance public works or projects, such as infrastructure improvementprojects.

2. Description of the Prior Art

Constructions and operations of public facilities such as roads andrailroads, facilities for public benefits such as healthcare facilitiesand social benefit facilities are of great concerns of the residents wholive in the related area, as they affect the basics of their life. It isdifficult for them to walk or drive without decent roads. It isimpossible for them to receive healthcares if there are no hospitals andother healthcare facilities when they get sick.

Therefore, those who live in an area where facilities that affect thebasics of residents' life, i.e., infrastructures (basic facilities of asociety) are poor try to move to another area where infrastructures arebetter. This creates a tendency for population concentration in bigcities where those infrastructures are well established, for example,Tokyo and Osaka in case of Japan. The concentration of population causesproblems such as longer commuting time, higher rents, smaller livingquarters, and excessive traffic congestions.

Thus, each country of the world is planning to improve infrastructuressuch as roads and healthcare facilities in various regions in thecountry, but it is also true that the governments are experiencingsevere financial tightness everywhere in the world in recent years. Thusthey are having difficulties in financing public works such asinfrastructure improvement projects from tax revenues alone. It isindispensable to infuse some private funds into public works such asinfrastructure improvement projects in order to alleviate the burden ontax money under the current financial tightness.

There are numerous financial instruments for raising capital, asdescribed in, for instance, in U.S. Pat. No. 6,148,293 to King titled“Method and Apparatus of Creating a Financial Instrument andAdministering an Adjustable Rate Loan System”.

In infrastructure financing, the borrower arranges for an acceptedguarantee-issuer to provide an irrevocable and unconditional guaranteein favor of a lender as beneficiary for repayment of a loan principalamount with all due interest for the loan term plus the lender's fees.The lender then provides or facilitates financing for public worksprojects through bond issuance and other means. As a means of acquiringprivate funds for investments in public works, a national or localgovernment issues bonds. Bonds are essentially negotiable papers issuedfor acquiring funds from a wide range of citizens. If issuers of bondsare a national or local government or an organization related to agovernment, the bonds are called public bonds.

In such public bonds, there has been a type of bonds issued by anational or local government for the purpose of acquiring private fundsfor public works such as infrastructure improvement projects. Such bondsare called government guaranteed bonds. Government guaranteed bonds arebonds whose issuer's liabilities for the repayment of the principal andrelated interests are guaranteed by the pertinent government.

On the other hand, bonds whose issuers are a private enterprise arecalled industrial bonds. Industrial bonds include bonds related to theSPC Law (Law concerning Liquidation of Special Assets of Special PurposeCompany). Bonds covered by the SPC Law are bonds related to so-called“project finance.” Bonds related to project finance are bonds issued foracquiring funds for executing a specific project. For example, if theuse of the capital acquired by a bond issued in relation to theconstruction and operation of a commercial building to be erected infront of a railway station is specified for the project of “constructionand operation of the station front building,” the bond is regarded as abond related to the project finance and a bond related to the SPC Law.Key bond terms as shown in FIG. 3 include “Construction & Operation Bondfor Y Station Front Building,” “principal and the interest shall beredeemable in 20 years from the issuing date”, “The redemption paymentfor this bond shall be available in exchange for this certificate at XBank's main office or at any of its branch or agent” (e.g.,“¥100,000,”), “If the redemption date happened to be a bank holiday, thepayment shall be made on the next business day,” “The bond shall be voidin 10 years from the day after the redemption date,” “Registration andreplacement of the bond certificate for reasons of soiling or damage orany other handling of the bond certificate shall be available at XBank's main office or at any of its branch or agent,” “Issuing Date:Apr. 1, 2002,” and “Redemption Date: Mar. 31, 2022,” etc. Differentcountries have different laws or regulations governing bonds or otherfixed rate financing instruments. The SPC law of Japan is used as anexample.

In the US, bonds pay interest that can be fixed, floating or payable atmaturity. Most debt securities carry an interest rate that stays fixeduntil maturity and is a percentage of the face (principal) amount.Typically, investors receive interest payments semiannually. Forexample, a $1,000 bond with an 8% interest rate will pay investors $80 ayear, in payments of $40 every six months. When the bond matures,investors receive the full face amount of the bond—$1,000. The interestrate on a floating-rate bond is reset periodically in line with changesin a base interest-rate index, such as the rate on Treasury bills. Somebonds have no periodic interest payments. Instead, the investor receivesone payment—at maturity—that is equal to the purchase price (principal)plus the total interest earned, compounded semiannually at the(original) interest rate. Known as zero-coupon bonds, they are sold at asubstantial discount from their face amount. For example, a bond with aface amount of $20,000 maturing in 20 years might be purchased for about$5,050. At the end of the 20 years, the investor will receive $20,000.The difference between $20,000 and $5,050 represents the interest, basedon an interest rate of 7%, which compounds automatically until the bondmatures.

PFI (public finance initiative; improvement of social funds usingprivate funds) is intended to efficiently and effectively improve socialfunds by means of promoting constructions, maintenances and operations(including planning thereof) of public facilities utilizing privatefunds, management capabilities and technological capabilities so as tocontribute to healthy development of national economy (Article 1 ofJapanese Law concerning Promotion of Improvement of Public Facilities,etc., Utilizing Private funds, etc.). The relation between a privateenterprise, a national or local government, residents, and banks,securities companies, etc. (hereinafter called “financial institutions”)in a scheme of PFI is as shown in FIG. 4.

A private enterprise prepares funds (32) by borrowing money from afinancial institution, executes construction and operation of a publicfacility such as a road, a prison, or a public housing (33) to providepublic services to residents (34). A national or local government payconsiderations (35) to the private enterprise for the services theenterprise provides to the residents on behalf of the a national orlocal government. For example, if the public service is the operation ofa prison, the national or local government pay considerations (35) tothe private enterprise for operating the prison on behalf of thenational or local government.

The residents receive the services (34) provided by the privateenterprise and pay the considerations (36) for the services or servicefees, and the private enterprise obtains income/profit (37) through itsinvolvement in the public works. The residents in return deposit money(31) in the financial institution, and the financial institution lendsmoney as investment (32) to the private enterprise and receives therepayment of the capital and the payment of the interest.

Thus, PFI is a means, which has been known for private institutions forobtaining funds from private financial institutions for the purpose ofconducting public works such as infrastructure improvement projects.Also known in PFI is a method of obtaining funds through bond issuesinstead of borrowing money from financial institutions.

However, there is a problem as shown below in the abovementionedgovernment guaranteed bonds, project finance bonds and PFI. For example,in case of government 100% guaranteed bonds, a government guarantees thebond issuer's full liabilities of repayment of principals and interestso that it may end up wasting a large some of tax money in fulfillingits guaranteed obligations. Therefore, it is difficult to improvenecessary infrastructures using government guaranteed bonds under atight financial condition.

In case of project finance bonds, there is another problem that bondbuyers are generally reluctant to buy bonds intended for public worksprojects to be executed by a private enterprise, because, when a privateenterprise, which issued project finance bonds, fails in operatingpublic works and the performance deteriorates, there is no guaranty forrepayment to the buyers of the project finance bonds. Therefore, it isalso difficult to improve necessary infrastructures using projectfinance bonds as well.

Moreover, in case of PFI, investments by financial institutions to aprivate enterprise are generally insufficient, because the credibilityof a private enterprise, which engages in risky public works, isgenerally too low. Therefore, it is difficult to attract private fundsinto public works through PFI because there is no guaranty for repaymentfor the bond issuers' liabilities for principal and interest repaymentliabilities similar even if it is guaranteed by a government when thegovernment is under a tight financial condition.

A document titled “Financing of major infrastructure and public servicesprojects: Lessons from French experience throughout the would” by DAEI(French Ministry of Public Works, Economic and International AffairsDivision), Private Financing of Public Infrastructure, Paris, 1994,describes various public-private partnership (PPP) models with differentallocations of responsibilities: operations and maintenance contract,lease, build operate and transfer (assets), concession of serviceprovision to users. The Private Participation in Infrastructure (PPI)Project Database of the World Bank tracks information on more than 2,700infrastructure projects with private investment in the energy(electricity and natural gas), telecommunications, transport, and waterand sewerage sectors in low- and middle-income countries.

In the model of Build-Operate-Transfer (BOT) orBuild-Operate-Own-Transfer (BOOT), a private entity receives a franchisefrom the public sector to finance, design, construct, and operate afacility for a specified period of time, after which the ownership ofthe project and the facility is transferred back to the public sector.During the time that the project proponent operates the facility, it isallowed to charge facility users appropriate tolls, fees, rentals, andcharges stated in their contract to enable the project proponent torecover its investment, and operating and maintenance expenses in theproject. Even though the private management of public projects generatesefficiency gains, BOT requires the private entity to raise its ownfunds, which is rather difficult.

Most infrastructure finance deals draw on an array of local andinternational funding sources, including syndicated commercial bankloans, bond issuances, equipment leasing, multilateral and export creditagency loans or guarantees, and equity commitments by project promotersand dedicated equity funds. For example, as described in Ch. 6 of thebook titled “Global Development Finance 2004—Harnessing Cyclical Gainsfor Development” by World Bank, Vietnam's first internationalBuild-Operate-Transfer power project, Phu My 3, with a generatingcapacity of 717 megawatts, reached financial closure in June 2003.Three-quarters of the funding took the form of debt, $40 million ofwhich came from the Asian Development Bank; $99 million from theJapanese export credit agency, JBIC; and $170 million from a syndicateof international banks (Bank of Tokyo-Mitsubishi, Credit AgricoleIndosuez, Credit Lyonnais, Fortis Bank, and Mizuho Corporate Bank). Theequity component of $103 million was provided by the main sponsors(Electricite de France, Sumitomo Corporation, and Tokyo Electric PowerCompany), as shareholders' capital. The extended political riskinsurance supporting the commercial tranche is provided by the AsianDevelopment Bank, the Multilateral Investment Guarantee Agency, andNippon Export and Investment Insurance. The financing structure of PhuMy 3, with several types of debt, equity, and credit enhancements, isnot unique to Vietnam or the power sector. It ensured access tointernational capital markets and enhanced efficiency by reducingoverall financing costs, and extending debt maturity to match theproject's underlying economics. Although the project involved severaltypes of debt, equity, and credit enhancements, it did not provide onesingle investment instrument with characteristics of both debt andequity.

The traditional means for raising funds for business operations areroughly divided into two legal categories. One has the nature of equityto which an investor can not claim repayment of paid in capital againsta company that had received fund from such investor as a means of fundfor its business such as investment in stocks, and the other has thenature of debt which a investor can claim repayment of principal at thedate of maturity as in the case of an investment in bonds.Considerations to investor for fund to business, in the case of stock,is “dividend,” and in the case of bond or loan is “interest.”

All securities stipulated by the Japanese laws are categorized in eachof the two categories above, there are no securities which belong toboth of them legally. Currently, in the U.S. and other countries, somefund raising means having middle nature between them, such as mezzaninefunds. Private equity and mezzanine funds, typically structured aslimited partnerships, are unregulated collective investment schemes, andhave therefore been marketable to private individuals. It will takes along period of time for governments to resolve the relevant issues, suchas their tax treatment as debt or equity.

The variety of securities are rigorously defined as follows under Clause1, Article 2 of the Japanese Law:

i) Government security,

ii) Municipal bond,

iii) Debt security issued by a juridical person under a special law,

iv) Specified corporate debt security prescribed in the Law Concerningthe Mobilization of Assets,

v) Corporate debt security,

vi) Equity security issued by a juridical person established under aspecial law,

vii) Preferred equity security prescribed in the Law ConcerningPreferred Equity Contribution to Cooperative Financial Institutions orinstrument representing the right to subscribe thereto,

viii) Preferred equity security prescribed in the Law Concerning theMobilization of Assets, or security representing the right to subscribethereto,

ix) Share certificate, subscription right certificate, subscriptionwarrant certificate,

x) Beneficiary security of an investment trust or foreign investmenttrust prescribed in the Law Concerning Investment Trusts and InvestmentCorporations,

xi) Investment security or foreign investment security prescribed in theLaw Concerning Investment Trusts and investment Corporations,

xii) Beneficiary security of a loan trust,

xiii) Beneficiary security of a special purpose trust prescribed in theLaw Concerning the Mobilization of Assets,

xiv) Such promissory note issued by an juridical person to raise fundnecessary for its business as may be prescribed by an ordinance of theCabinet Office (Commercial paper),

xv) Security or instrument issued by the government or a juridicalperson of a foreign country that has the nature of any security orinstrument set forth in i) through ix), or xii), xiii) or xiv) hereof(Foreign share certificate, foreign commercial paper, etc.),

xvi) Such security or instrument issued by a foreign juridical personrepresenting the beneficiary right to a trust set up on the basis ofloan credits of a person engaged in the banking business or any otherform of money-lending business, or any other right similar thereto, asmay be prescribed by an ordinance of Cabinet Office (Beneficiarysecurity of trust, etc.),

xvii) Security or instrument set forth in each of i) through xvi),xviii) and xix) hereof, or security or instrument representing rightspertaining to trade in options contract on a security or to trade inover-the-counter options contract on a security that has the right to beregarded as security,

xviii) Security or instrument issued by a person who has received adeposit of a security or instrument set forth in i) through xvii) heretoand issued in a country other than one in which such security orinstrument on deposit was issued, representing the right pertaining tothe security or instrument on deposit (ADR, etc.), or

xix) Such security or instrument other than those set forth in each ofthe i) through xviii) hereto as may be prescribed by a Cabinet order asone that is deemed to require the assurance of the public interest orthe protection of investors in the light of its liquidity and othercircumstances (Certificate of negotiable deposit issued by foreignjuridical person).

Accordingly, all securities stipulated by the Japanese Law arecategorized in each of the two categories of debts and equity, there areno securities which has the characteristics of both legally.

In Japan, the classification between equity and debt is approachedthrough the view of what kind of legal formality has been adopted, thereis no security that has been developed having characteristics of both,and they are distinguished by a standard: if an instrument has beenadopted using the legal formality of equity, although it also has anature of debt, it shall be treated as an equity; and if an instrumenthas been adopted using the legal formality of debt, although it also hasa nature of equity, it shall be treated as a debt. For example, a“Subordinated Loan” is popular in Japan and is utilized by thegovernment to pour public funds into some financial institutions.Although a “Subordinated Loan” can be categorized as having a middlenature because, when the debtor becomes insolvent, it is inferior to anormal loan regarding superiority of repayment, but is superior to arepayment of capital to an equity holder, a “Subordinated Loan” islegally categorized as a debt, and a compensation/payment is “interest”which the rate of such interest is usually higher than that of anordinary loan.

SEC is the governing body in the US oversee the bond markets to protectinvestors by ensuring accurate information disclosure for valuingcompanies and securities and ensuring efficient secondary markets fordebt issuance by corporations and state and local governments. Whileinstitutional investors dominate the bond markets, retail investors'participation is on the rise. U.S. households hold more corporate debtthan municipal bonds. Approximately 65% of trades in investment grade,high yield and convertible debt are under $100,000 in size, a rangeassumed to represent retail activity, and there are comparable levels ofretail activity across the spectrum of credit quality.

The members of the National Association of Securities Dealers, Inc.(“NASD”) must report transaction information on transactions in allcorporate debt instruments, including both investment grade andhigh-yield debt securities, within 45 minutes of execution.Professionals access the Trade Reporting and Compliance Engine (TRACE)Data on a “real time” basis (as long as they are undated, not when thetransactions are matched) through the TRACE website or market datavendors, and many more access it on a delayed basis. While mostcorporate bond trades are now reported to the NASD, not all of that datais disseminated to market users. So far, the NASD disseminatestransaction information on more than 4,700 securities, including largeissue investment-grade bonds, 50 high-yield bonds, and an additional 120BBB-rated bonds. These bonds account for about 70% of the dollar valueof trading activity in investment grade bonds, including the mostactively traded bonds. The NASD's Bond Transaction Reporting Committee(“BRTC”) continues to discuss the next phase of dissemination of tradedata for all remaining bonds. The remaining bonds include the smallerinvestment-grade instruments and high-yield bonds, in which there isconsiderable retail and institutional interest. It is these types ofhigh-yield bonds—offering higher interest, yet lower quality—wherepricing decisions are the most difficult and where real-time informationwould be most beneficial to investors and dealers as well.

Most corporation bonds are unsecured debt obligations backed only by theissuer's general credit and the capacity of its cash flow to repayinterest and principal. Once a bond issue is closed, debt servicepayments are made by the issuer to the bondholders through a payingagent or trustee, which is a bank chosen by the issuer. If the bondissue ever goes into default, the paying agent or trustee usuallyrepresents the bondholders in remedial proceedings against the issuer.Guaranteed bond come with a guarantee of one corporation's bonds byanother entity. For example, bonds issued by a subsidiary may beguaranteed by the parent corporation. Or bonds issued by a joint venturebetween two companies are 100% guaranteed by both parent corporations.Guaranteed bonds become, in effect, debentures of a guaranteeingcorporation and benefit from its presumably better credit. Sometimes, itmakes economic sense for the issuer to pay a third party to guaranteethe bond issue which is called credit enhancement. An insurance companymay issue an insurance policy 100% guaranteeing payment of debt serviceon the bonds, or a bank may issue a letter of credit to 100% guaranteethe bonds.

In US, some bonds have characteristics of equity but still fall into thecategory of debt. For example, income bonds or revenue bonds are bondsthat promise to pay interest only when earned by the issuer, and failureto pay interest does not result in default. As such, it is unattractiveto private investors. As another example, combination bonds are bondswith double guarantee. A combination bond is guaranteed by revenuegenerated from the project that the bond is financing and guaranteed bythe full faith and credit of the government issuing the bond, i.e., anunconditional commitment to pay 100% of interest and principal on debt.Although they are fully guaranteed by a government, when the governmentis under a tight financial condition or suffers from big spending ortrade deficits, the government gets unduly burdened and investors getcold-feet.

There is a need for a fixed rate financing instrument havingcharacteristics of both debt and equity to provide sufficient confidenceto private investment without unduly burdening governments or thirdparties to the issuance of such a financing instrument. Once such a newfinancing instruments become available, there are needs for a method forestablishing a market for them and for a method for offering themon-line.

A stock or bond newly offered for sale by a corporation or a governmententity, usually through an underwriter or a private placement. A privateplacement is only available directly to institutional investors, such asbanks, mutual funds, insurance companies, pension funds, andfoundations, which does not require SEC registration, provided thesecurities are bought for investment purposes rather than resale. Tonewly offer a stock or bond to the public, an underwriter orunderwriting syndicate is indispensable, which guarantees purchase ofall shares of stocks or bonds being issued by the corporation orgovernment entity, including an agreement to purchase by the underwriterif the public does not buy all the shares or bonds to assume risk. TheSEC requires: offers cannot be made before a registration statement hasbeen filed with the SEC; only oral offers can be made after aregistration statement is filed; written offers can not be made untilthe registration statement is declared effective by the SEC staff;offers can not be accepted until a registration statement becomeseffective; and after a registration statement is declared effective,sales literature can not be delivered unless accompanied or preceded bya final statutory prospectus.

An on-line offering registered with the SEC that is offered orsold—partly or wholly—using electronic media, including the internet,e-mails, or CD-ROMs. In some cases, not only are offers and sales madeelectronically, but also an issuer's and/or underwriter's deliveryobligations are met electronically. The term “e-offering” typically isused to describe an underwritten offering in which one or moreunderwriters make offers and sales through a Web site and/or e-mails.Some of the underwriters who specialize in this area refer to themselvesas “e-underwriters,” such as Wit Soundview®, Charles Schwabe®, e*Trade®,DLJdirecWR®, Hambrecht®, etc. Technology is leveraged to reduce costs,facilitate communication and keep better track of how an offering isprogressing. Companies or underwriters use Web site prospectuses toreach a broader pool of potential investors. The underwriters easilybuild their “book” of indications of interest via e-mail. Potentialinvestors easily research a company's and its industry's prospects.Electronic delivery reduces printing and postage costs.

However, there are gray legal issues regarding e-offering which have notbeen addressed by the SEC or the courts in the US. Hopefully, moreformal and informal guidance (procedures submitted by underwriters andissuers and then reviewed and approved by Office of Chief Counsel of theDivision of Corporation Finance of SEC on an individual basis) willbecome available. For example, companies that conducted IPO Dutchauctions included: Ravenswood Winery Inc. (Feb. 4, 1999), Salon InternetInc. (Apr. 19, 1999), Andover.net (Sep. 16, 1999), and Nogatech Inc.(Mar. 14, 2000). After the dot.com bobbles burst in 2000, Google.com hadits on-line initial public offerings (IPO) in August 2004 in which theprocess of applying for newly issued shares was handled electronically(via websites). Morgan Stanley and Credit Suisse First Boston were namedas the lead underwriters for the deal.

During 2000, there were several pioneers that used the Internet to issuedebt off a shelf, such as Dow Chemical, Ford Motor Credit Company,Goldman Sachs, Discover Financial Services, PeopleFirst, and Fiat Spa.During 2000, several exempt issuers (i.e. which were not required toregister their offerings or file periodic reports) issued bonds off ashelf using the Internet to varying degrees—including the World Bank,Freddie Mac, and Fannie Mae. Even though the amount of underwritingcompensation typically charged in public offerings of investment-gradedebt securities is less than 1%, which is below those charged in equityofferings, the issuers can choose to file without underwriters. There isa need to offer new bond or fixed rate financing instruments on-line tothe public without mountains of red tape, expenses paid to theunderwriters etc.

Direct Stock Purchase Plans are SEC-regulated and established bycompanies to enable investors to purchase company shares without theintervention of a broker and paying a commission. Larger companies witha liquid market for its stock tend to have direct stock purchase plans.Companies benefit from the ability to cross-market their products andservices and raise capital inexpensively. Eligibility criteria,investment program procedures, and program features may varysubstantially from program to program. Some companies administer thesale of stock directly through their corporate offices, while others usea plan run through a bank or a trust company, which may also functionsas transfer agent. The shares may be retained by a stock transfer ortrust company, or converted to certificate form and mailed to aninvestor. Upon the submission of a share purchase order, an investorwill receive an immediate e-mail confirmation of the order as well as alist of the exact price of the shares purchased. Until now, the acceptedpractice for Direct Purchase programs are to aggregate all purchaseorders submitted over the course of a week, semi-week, or a day (by 4:00p.m.) and to execute them all at once. The purchase price will not beknown until the purchase is completed at a later time. Such a processintroduces a fair degree of uncertainty to the process and dissuadesmany potential investors from participating in the program. There is aneed to offer new stock or bond on-line to the public with real-timepricing. In U.S., investors can buy bonds directly from the governmentthrough TreasuryDirect at http://www.treasurydirect.gov. Currently,there is no direct purchase plan for corporate bonds or other financinginstruments issued by private corporations. There is a need to directlyoffer new bonds and fixed rate financing instruments on-line to thepublic or via a direct purchase plan.

The Bond Market Association published a survey in December 2004 titled“eCommerce in the Fixed rate Markets: the 2004 Review of ElectronicTransaction Systems” which catalogs and describes all systems that allowdealers or institutional investors to buy or sell fixed rate productselectronically. Online bond trading platforms have accelerated thedevelopment and implementation of value-added services to enhance theefficiency of electronic trade execution and reduce users' costs. Mostcorporate/agency bonds trade over-the-counter; nevertheless, there aresome bonds called “listed” bonds or “exchange-traded” bonds that tradeon the New York Stock Exchange. The OCT market is comprised of dealersthat hold an inventory of bonds, who buy and sell for their own account.Others act as agents and buy from or sell to other dealers in responseto specific customer requests. These OCT bonds are traded on the“secondary” market and are available at dealers. If an individualinventor sends a “firm” bid to a dealer for selling OCT bonds, theinvestor must be reachable by phone or email for the next hour or two.Usually firm bids are good for one hour. If the dealer has no inventory,it may take over well over an hour for the dealer's trader to callvarious other dealers and for the other dealers to get back to theinitiating dealer with bids. At times, there may not be any dealerwanting to purchase the bond. Orders to sell are handled on a besteffort basis only.

New York Stock Exchange (NYSE) requires all bonds to be traded in theAutomated Bond System (ABS) that records bids and offers for inactivelytraded bonds until they are canceled or executed, and matches them on aprice and time priority basis. Because bids and ask prices of inactivelytraded bonds aren't constantly changing due to demand and supplyconditions, investors have difficulties to look for a quote. Byelectronically monitoring all inactive bonds, the NYSE keeps aninventory of bond prices for investors to check.

Users can access a database of all trades executed on the system and, insome cases, trades executed on other platforms or by voice. The NationalAssociation of Securities Dealers in the corporate market and theMunicipal Securities Rulemaking Board in the municipal market are tryingto expand their trade reporting systems in early 2005. Bond Exchange ofSouth Africa (BERS) was formally licensed in May 1996 as a licensedfinancial exchange on which bonds and related products were to be tradedand matched on the same trading day on which the trade is struck, andall trades must be reported and matched to BERS within one hour fromwhich the trade is struck South African bonds are quoted and traded inyield, and are settled in price. There is a standard convention forconverting between the yield and the price of a bond for a givensettlement date. However, BERS does not process bond transactions asefficient as a stock exchange executes stock transactions. The BondMarket Association actively promotes and urges the SEC to establish aself-regulatory organization for the debt market. There is a need for abond and fixed rate instrument exchange which processes transactions asefficient as the stock exchange executes stock transactions.

Bond market information is available at a website sponsored by the BondMarket Association with data form MSRB and Standard & Poor's (“S&P”). Itdivides bonds into Municipal Market, Government Market, CorporateMarket, and mortgage-backed (MBS) and asset-backed (ABS) Market. Asmentioned, in the US, bonds are not traded on an formal exchange, arethus considered over-the-counter securities. Most debt instruments aretraded by investment banks making markets for specific issues. Ifsomeone wants to buy or sell a bond, they call the bank that makes themarket in that bond and asks for quotes. The broker/dealer negotiatedirectly with one another over computer networks and by phone. Bondstend to trade infrequently, making the bid-ask spread larger. Currently,there are formal exchanges providing or maintaining a marketplace forstocks, options, futures, commodities, or currencies, but not for bondsor unique fixed rate financing instruments. There is need for formalexchanges for bonds or unique fixed rate financing instruments

SUMMARY OF THE INVENTION

The present invention intends to provide bonds to be issued for thepurpose of acquiring private funds to be invested in public works suchas infrastructure improvements so that infrastructure improvements canbe implemented even under a tight financial condition.

It is another object of the invention to provide a novel method ofissuing a new financial product different, from stocks and bonds, thatwill provide investors who trade stocks and bonds with a new chance ofearning profits by creating and marketing a financial instrument thatprovides for partial guarantee of a security by a third party.

It is a purpose of this invention to provide a new financial instrumentwhich does not specify the redemption date although the dividend,interest and guaranty are stated, thus providing a new means forenterprises to obtain funds more easily, and a new financial product forinvestors, different from stocks and bonds, for earning profits throughtransactions, as well as a new market forming method for the newfinancial instrument.

It is a purpose of this invention to provide a market place for thegeneral public to directly purchase bonds or a newly-issued fixed ratefinancing instrument.

The present invention provides a means of issuing bonds related toproject financing, where projects are public works such asinfrastructure improvement projects. A person who wishes to purchasesuch a bond is able to see the contents of the public works to which theperson is investing. Since the person can select the public works atwill, in which his/her money is to be invested, this method enhanceshis/her desires for purchasing the bonds. Moreover, since the person'sinvestment will never be used in public works to which he/her objects,the investor can purchase bonds with more confidence.

The present invention provides a private enterprise trying to executepublic works such as infrastructure improvement projects a means ofacquiring large sums of funds from private sectors to be invested intothe public works such as infrastructure improvement projects throughbond issuing. This is because those who are buying bonds can be assuredfor the repayment as the principal and interests repayment liabilitiesof the bond issuers are warranted to certain fixed limits by a nationalor local government so that the bond buyers are guaranteed to be able tocollect the principal and interests safely to certain fixed limits evenwhen the a private enterprise fail in the operation of the public works.The owner of the securities issued under the present invention may beeligible for dividends, besides interests.

The securities issued according to this invention are a new kind offinancial product which did not exist before. This product encouragespeople who have never bought securities to buy securities. Therefore,the invention can create a new financial market.

Furthermore, the owner of the securities is guaranteed for the repaymentof the principal of the funds provided to the business operator by theGovernment of Japan, a public entity, or a private enterprise ofJapanese nationality, as well as the government of a foreign country, ora public entity of foreign nationality either singularly by one of them,or jointly by two or more of them within a predetermined limit, if thebusiness operator who issued the securities becomes unable to payinterests in accordance with the interest wording due to bankruptcy orpoor business.

Moreover, the present invention provides a means of preventing thenational and local governments from wasting tax money, because thenational or local government's warrant for the bond issuers' principaland interest repayment liabilities are limited to certain levels thatare determined fairly by an independent public organization. Thus, thenational or local government are not obliged to bear the full amounts ofthe bond issuers' principal and interests repayment liabilities when theoperations of public works such as infrastructure improvement projectsby a private enterprise fail as in the case of government guaranteedbonds. Furthermore, since the present invention encourages those whohave never bought bonds to buy bonds, it forms a new bond market.

An embodiment of the invention includes a method for forming a newmarket capable of making a person who has never purchased securitiespurchase securities issued by using the system, and trade thosesecurities in the market as needed.

In an embodiment of the invention a server includes a means fortransmitting information an offer, indicating securities available tothe client and a means for receiving a bid or an offer to purchasesecurities. The server also has software capable of market making orcreating an authorization to issue securities based, in part, on thebids or offers to purchase securities received from the client. Theserver also has means for receiving individual user identificationinformation and user institution identification information. The serveris also capable transmitting and authorization including the individualuser identification information and the authorization to issuesecurities to the securities issuing machine. The server also has meansfor receiving a confirmation of the issue of securities from thesecurities issuing machine, accumulating a total of the securitiesconfirmed as issued and calculating fees to charge the userinstitutions.

In the embodiment of the invention, the client means for transmittingthe bid or offer to purchase securities to the server identificationinformation about both the individual user the user institution to theserver.

These and other objects of the present invention will become readilyapparent upon further review of the following specification anddrawings.

The present invention meets or exceeds all the above objects and goals.Upon further study of the specification and appended claims, furtherobjects and advantages of this invention will become apparent to thoseskilled in the art.

BRIEF DESCRIPTION OF THE DRAWINGS

Various other objects, features, and attendant advantages of the presentinvention will become more fully appreciated as the same becomes betterunderstood when considered with the accompanying drawings, in which likereference characters designate the same or similar parts throughout theseveral views, and wherein:

FIG. 1 is a view of a bond certificate according to an embodiment of thepresent invention.

FIG. 2 is a diagram showing development and operation of a public work(hospital) using the bond according to the embodiment of the presentinvention.

FIG. 3 is a view of an example of bond certificate based on the SPC Law.

FIG. 4 is a diagram showing the scheme of PFI.

FIG. 5 shows a table of three kinds of fixed rate financing instrumentsof the invention including the one for an Odaiba Casino Project.

FIG. 6 shows a table of three kinds of fixed rate financing instrumentsof the invention including the one for a Japanese Highway Project.

FIG. 7 shows a table of two kinds of fixed rate financing instruments ofthe invention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

In order to more clearly and concisely describe the subject matter ofthe claims, the following definitions are intended to provide guidanceas to the meanings of specific terms used in the following writtendescription. Also it is to be understood that the phraseology orterminology employed herein is for the purpose of description and not oflimitation. As used herein:

“A fixed rate financing instrument” of the invention: A fixed ratefinancing instrument issued by a corporation, government, or otherorganization which offers evidence of debt or equity, and pay a fixedinterest rate and/or dividend. Such debt instrument, that obligates theissuer to pay to the bondholder the principal (the original amount ofthe loan) plus interest, is not secured by any property but only securedby the issuing entity's promise to pay. The instrument may be partiallyguaranteed by public entities. The unique “fixed rate financinginstruments” of the invention either have a maturity date for only partof the debt (See “Odaiba Casino” Project in FIG. 5), or have no maturitydate at all (See “Japanese Highway” Project in FIG. 6) such that theymay be subject to the US Securities Exchange Act of 1934, although theywere not explicitly defined under the law. The official definition ofsecurities under the Securities Exchange Act of 1934 is: “Any note,stock, treasury stock, bond, debenture, certificate of interest orparticipation in any profit-sharing agreement or in any oil, gas, orother mineral royalty or lease, any collateral trust certificate,pre-organization certificate or subscription, transferable share,investment contract, voting-trust certificate, certificate of deposit,for a security, any put, call, straddle, option, or privilege on anysecurity, certificate of deposit, or group or index of securities(including any interest therein or based on the value thereof), or anyput, call, straddle, option, or privilege entered into on a nationalsecurities exchange relating to foreign currency, or in general, anyinstrument commonly known as a ‘security’; or any certificate ofinterest or participation in, temporary or interim certificate for,receipt for, or warrant or right to subscribe to or purchase, any of theforegoing; but shall not include currency or any note, draft, bill ofexchange, or banker's acceptance which has a maturity at the time ofissuance of not exceeding nine months, exclusive of days of grace, orany renewal thereof the maturity of which is likewise limited.”

A “Dividend of the fixed rate financing instrument” is the distributionof an amount of profits of operation to a holder of the fixed ratefinancing instrument of the invention. The money amount of the dividendmay be defined as a fixed amount of the operation profits (e.g., as soonas the operation profits reaching a target amount until a pay-off daysimilar to an amortization pay-off day of a traditional bond). The moneyamount of the dividend may also be defined as a variable amount, such asa percentage of the operation profits (e.g., since the day ofoperation), or a combination with a fixed amount of the profits. Thedividend of the fixed rate financing instrument of the invention isessentially different from a conventional dividend to a stockholderwhich is the distribution of profits to a company's shareholders,usually paid quarterly.

“Public works” and “public projects”: works constructed for public use,benefit, or enjoyment, especially when financed and owned by agovernment or a public entity. Sometimes a government will takerecourses to such measures in times of economic recession, as a form of“pump priming,” under the belief that borrowing money and spending it onthe wages and materials needed for public works will improve theeconomy. Public works were a major part of the New Deal in the 1930sthat pulled the U.S. out of the Great Depression. The terms according tothe invention include not only public works in the conventional sense,i.e., public works that are planned solely by a national or localgovernment and executed solely by a national or local government, butalso public works that are planned solely by a private enterprise andexecuted solely by a private enterprise; public works that are plannedsolely by a national or local government and executed solely by aprivate enterprise; public works that are planned solely by a privateenterprise and executed solely by a national or local government; publicworks that are planned solely by a national or local government andexecuted jointly by a national or local government and a privateenterprise; public works that are planned solely by a private enterpriseand executed jointly by the a national or local government and a privateenterprise; public works that are planned jointly by a national or localgovernment and a private enterprise and executed solely by a national orlocal government; public works that are planned jointly by a national orlocal government and a private enterprise and executed solely by aprivate enterprise; and public works that are planned jointly by anational or local government and a private enterprise and executedjointly by a national or local government and a private enterprise.Examples of public works include highways, docks, airports, canals,dams, dikes, pipelines, railroads, roads, tunnels, artificial harbors,mines, schools, hospitals, water purification and sewage treatmentcenters, etc.

A “fixed rate public work financing instrument” is a fixed ratefinancing instrument of the invention which is dedicated for financingpublic works and issued by a corporation, government, or otherorganization which offers evidence of debt or equity.

“Infrastructure improvement projects”: include constructions andoperations of public facilities such as roads, railways, harbors,airports, rivers, parks, public water supply systems, public sewagesystems, and public industrial water supply systems; constructions andoperations of facilities for government uses such as governmentbuildings and housings; constructions and operations of facilities forpublic benefits such as public housings, educational and culturalfacilities, waste processing facilities, healthcare facilities, socialbenefit facilities, welfare facilities, parking facilities, andunderground commercial facilities; constructions and operations ofinformation and communication facilities, heat energy supply facilities;new energy facilities; recycling facilities (except waste processingfacilities), sightseeing facilities, and research facilities; andconstructions and operations of commercial buildings annexed to railwaystations and other commercial buildings.

“Third parties to issuance” are anyone except the executors/debtors andthe buyers/holders of the fixed rate financing instruments of theinvention. The third parties to issuance may be public or privateentities, for profit or non-profit entities, financial or non-financialentities, such as the World Bank, the Asian Development Bank, theJapanese Export Credit Agency (JBIC), the Tokyo Electric Power Company,the Multilateral Investment Guarantee Agency, the Nippon Export andInvestment Insurance, the Catholic Church, etc.

“Terms” of a fixed rate financing instrument of the invention are a setof features, requirements, symbols and terminology regarding technicaland quality characteristics of the financing instrument. The termsinclude, but are not limited to, name and contents of the public work(e.g., locations of performance, delivery of services, deadline(s) forcompleting the public work); executor(s) of the public work; issuerand/or underwriter; face value; terms of payment of interest/dividend;grantor; percentage of guarantees by third parties to the issuance;redemption period/date and location; retirement date; and combinationsthereof; etc.

FIG. 1 is a view of a bond certificate according to an embodiment of thepresent invention. On the face of the bond certificate according to thepresent invention, a wording 1 of “Construction & Operation Bond for YHospital to Be Operated by Private Enterprise,” a wording 2 of “20Years,” a wording 3 of “¥100,000,” a wording 4 of “The redemptionpayment for this bond shall be available in exchange for thiscertificate at X Bank's main office or at any of its branch or agent,” awording 5 of “This bond is warranted by the Government of Japan for 60%of its value,” a wording 6 of “If the redemption date happened to be abank holiday, the payment shall be made on the next business day,” awording 7 of “The bond shall be void in 10 years from the day after theredemption date,” a wording 8 of “Registration and replacement of thebond certificate for reasons of soiling or damage or any other handlingof the bond certificate shall be available at X Bank's main office or atany of its branch or agent,” a wording 9 of “Issuing Date: Apr. 1,2002,” and a wording 10 of “Redemption Date: Mar. 31, 2022” are written.FIG. 2 is a diagram showing the development and operation of the publicwork (hospital) using the bond according to the embodiment of thepresent invention. The bond according to the embodiment of the presentinvention will be described below in detail referring to FIG. 2.

The wording 1 of “Construction & Operation Bond for Y Hospital to BeOperated by Private Enterprise” indicates that this bond is a bondaccording to the embodiment of the present invention. The wording 1clarifies that the bond is related to operation by a private enterprise15 (provides healthcare services to Japanese citizens 16 and collectshealthcare fees 18). The wording 1 also clarifies that the bond is abond issued with an intention of acquiring funds (11) for theconstruction of Y Hospital (14).

Therefore, a Japanese citizen who is buying (12) the bond can clearlyunderstand from the wording 1 that the funds being acquired by the bondsare invested (13) strictly into the construction of the Y Hospital (14).Thus, the Japanese citizen who is buying the bond can have a clear sensethat “my money will be invested for the construction of Y Hospital.”

The role of the Government of Japan in FIG. 2, therefore, can bereplaced by any trusted entity, such as but not limited to, a public orprivate entity of Japan, the government of a foreign country, a publicor private entity of foreign nationality, either singularly by one ofthem or jointly by two or more of them.

The role of the private enterprise in FIG. 2, therefore, can be replacedby the trusted entity, which may for instance be, but is not limited to,the Government of Japan, a public or private entity of Japan, thegovernment of a foreign country, a public or private entity of foreignnationality, either singularly by one of them or jointly by two or moreof them.

Thus, according to this bond, contrary to other bonds where the buyersare not aware of what purposes the investments are used, the use of thefunds acquired by the bond is clear so that the bond buyers' confidencecan be enhanced, the bond buyers' desire for purchase can be increased,and ultimately promote investment of private funds to public works (13).

The wording 2 of “20 Years” indicates that the principal and theinterest shall be redeemable (21) in 20 years from the issuing date. Thewording 3 of “¥100,000” indicates the amount of fund (12) obtained bythe issue of this bond. The wording 4 of “The redemption payment forthis bond shall be available in exchange for this certificate at XBank's main office or at any of its branch or agent” clarifies thelocations of redemption. The wording 4 also clarifies that the principaland interest are paid in exchange for the bond certificate.

The wording 5 of “This bond is warranted by the Government of Japan for60% of its value” clarifies that the Japanese government warrants (20)the bond issuer's principal and interest repayment liabilities to theJapanese citizen (buyer) within a certain limit. Although Z Company isliable to pay (19) to the bond issuer the cost of development of YHospital and its interest from the profit and revenue earned from theoperation of Y Hospital (18) through the Japanese government, theoperation of Y Hospital can deteriorate or fail.

However, the wording 5 warrants that 60% of the principal to be repaidby the bond issuer to the Japanese citizen (buyer). Thus, contrary tothe bond based on the SPC Law, the bond buyers' confidence can beenhanced, and ultimately promote investment of private funds to publicworks (12). The warranty (20) by the Japanese government of the bondrepayment liability is limited to a certain amount. Therefore, theJapanese government is not required to warrant the entire amount of thebond's principal and interests according to this bond.

The wording 6 of “If the redemption date happened to be a bank holiday,the payment shall be made on the next business day” clarifies thepayment shall be made on the next business day as it is not clear whenthe payment (21) of the principal and the interest will be made if theredemption date falls on a bank holiday.

The wording 7 of “The bond shall be void in 10 years from the day afterthe redemption date” clarifies that the bond shall be void (21) after aperiod.

The wording 8 of “Registration and replacement of the bond certificatefor reasons of soiling or damage or any other handling of the bondcertificate shall be available at X Bank's main office or at any of itsbranch or agent,” clarifies how the bond certificate is handled in caseof need for registration and replacement of the bond certificate forreasons of soiling or damage.

The wording 9 of “Issuing Date: Apr. 1, 2002” clarifies the issuing date(11). The wording 10 of “Redemption Date: Mar. 31, 2022” clarifies theredemption date (21).

The abovementioned bond is according to one of the embodiments of thepresent invention. Therefore, the bonds according to the presentinvention are not limited to the abovementioned bond. For example, thewording 1 can be anything as long as the particular bond is a bondrelated to a certain project finance, for example, they can be“Construction Bond for T Road Operated by Private Enterprise,”“Construction Bond for R Senior Citizen's Home,” and “Construction &Operation Bond for W Public Housing Project.”

Moreover, the degree of warranty of repayment liabilities by thenational government indicated in the wording 5 is not limited to “60%”but rather can be any degree or ratio warranted by the a national orlocal government, for example, 10, 20 or 50%. Further, the entity thatwarrants the repayment liabilities in the wording 5 does not have to be“Japan,” but rather can be any arbitrary country in the world such asU.S., China, Korea, and U.K.

Furthermore, the warranting government in the wording 5 can be anarbitrary local government(s) in the world such as Tokyo, Osaka, LosAngeles, and Beijing. The buyer of the bond according to the inventionis not limited to a Japanese citizen. A citizen of an arbitrary countryof the world, such as a U.S., Chinese, Korean and U.K. citizen can be abuyer of the bond according to the invention.

The “bond issuer” can be a foundation for urban development, or asimilar entity.

According to the present invention, those who are buying bonds can beassured for the repayment as the principal and interests repaymentliabilities of the bond issuers are warranted to certain fixed limits bya national or local government so that the bond buyers can have moreconfidence in buying the band as they are guaranteed to be able tocollect the principal and interests safely to certain fixed limits evenwhen the a private enterprise fail in the operation of the public works.

As such, it is obvious that the redemption claim materializing after thedue date for a bond issued according to the present invention is backedby strong credibility. Therefore, the present invention can be aneffective means of cultivating unutilized funds held by privateinvestors or citizens by providing unique bonds.

Each of the fixed rate financing instruments of the invention shown inFIGS. 5-7 is partially guaranteed by one or more guarantors to provideprotection to investors. The prior art guaranty for a debt covers 100%of all principal and interest amount of debt. However, the fixed ratefinancing instruments of the invention only guarantee between 0-100%,preferably 50% to 80%, of the total principal and outstanding interest.Where a debt is under guaranty by a guarantor, its legal nature isstrongly assumed to be a debt, but the remaining part of obligation notunder such guarantee can be characterized as “security” which has natureof equity as long as it is not under 100% of guarantee.

Most of the listed fixed rate financing instruments of the invention inFIGS. 5-7, such as the one for the “ODAIBA CASINO” (with a redemptionperiod 10 years and an annual interest rate 3%), the one for the “NUMAZUMUNICIPAL HOSPITAL” (with a redemption period 5 years and an annualinterest rate 2%), the one for the “SAITAMA STATION FRONT BUILDING”(with a redemption period 8 years and an annual interest rate 2.5%), theone for the “STOMACH CANCER SUPPRESSANT DEVELOPMENT PROJECT” (with aredemption period 10 years and an annual interest rate 2.5%), the onefor the “XX SATELLITE PROJECT” (with a redemption period 6 years and anannual interest rate 2%), the one for the “YY OIL FIELD PROJECT” (with aredemption period 10 years and an annual interest rate 5%), and the onefor the “ZZ NATURAL GAS PROJECT” (with a redemption period 9 years andan annual interest rate 2.5%), have legal nature of debts, since each ofthem is stipulated with a redemption period (from 5 to 10 years) and anannual interest rate (from 2-5%) for periodically interest paymentsbefore a redemption date.

For example, in the “ODAIBA CASINO” project, before the completion ofthe Casino, the proceeds from selling the “3% ODAIBA CASINO Construction& Operation Bonds” according to the invention (although named as bonds,it is a fixed rate financing instrument of the invention) are used topay for the construction cost and the interests to the instrumentholders (directly or via a facilitator/underwriter of the instrument).After the completion of the Casino, the revenues and profits generatedby the Casino continue to pay for the interests to the instrumentholders. On the date of redemption, the accumulated profits generated bythe Casino pay off the principal of the ODAIBA CASINO Construction &Operation Bonds. If the proceeds from selling the ODAIBA CASINOConstruction & Operation Bonds are not sufficient to pay for theinterests to the instrument holders during construction, or if therevenues and profits generated by the Casino are not sufficient to payfor the interests to the instrument holders during the operation of theCasino, or if on the redemption date, the accumulated profits generatedby the Casino are not sufficient to pay off the principal/face value ofthe Bonds, the executors are 100% liable for paying the due interests orprincipal to the instrument holders. However, if they default, thegrantor which guarantees 70% of interest payments for 10 years as wellas 70% of principal at redemption, has to pay 70% of any due interestand principal and/or according to the terms stipulated on the back ofthe Bonds. The remaining 30% debt is not guaranteed by any other thirdparties, thus still has to be paid by the executors/debtors out ofrevenues, assets, etc. based upon negotiation between the holders andthe debtors or any applicable bankruptcy proceedings. The Terms andConditions of the ODAIBA CASINO Construction & Operation Bonds arelisted in Table 1.

TABLE 1 Terms and conditions 4 Apr. 2004 Description 1. 3% ODAIBA CASINOConstruction & Operation Bonds (“Bonds”) are a private security issuedunder the Japanese Law concerning Promotion of Improvement of PublicFacilities 19XX for the Executors of the construction and operation ofthe ODAIBA CASINO. Bonds are registered on the National Savings StockRegister and are subject to The Japanese Law concerning Promotion ofImprovement of Public Facilities 19XX as amended or re-enacted from timeto time. In the event of any differences between these terms andconditions and the Regulations, the Regulations will prevail. THE BONDSARE NOT OBLIGATIONS OF THE UNITED STATES GOVERNMENT, BUT ARE 70%GUARANTEED BY THE UNITED STATES GOVERNMENT. 2. In these terms andconditions: (a) “Executors” include the Metropolis of Tokyo and thefollowing management companies in Las Vegas, USA; (b) “SAKURA” meansSakura Bank operating through its Tokyo office or such other office asSAKURA may specify; (c) “post office” means a branch of Post Office Ltdin Japan. Interest 3. Bonds earn interest at 3% fixed rate for aspecified period of 12 months starting from the date of investment. Wecall each period of time a “term”. Each term will have its own “Issue”of Bonds issued in sequence (e.g., 1, 2, 3, etc) and the same rate applyto each Issue of each term. 4. The rate earned by a Bond of a particularIssue will be determined by: (a) its capital value at any time - theoriginal investment plus any interest added to the Bond (see paragraph7) less any repayment; (b) whether you choose to have interest paid oradded to the Bond annually or monthly (see paragraphs 9 and 10). 5. AnyIssue of Bonds can be withdrawn from sale without notice. An applicationcan only be accepted for the Issue on sale on the date of investment(see paragraph 18). 6. Subject to paragraphs 25 and 36 interest isearned for each day your Bond is held on the value of your Bond at theend of that day. This includes the date of investment but not the dateyou cash in your Bond. Interest is earned on a daily basis at 1/365 ofthe annual interest rate for each day (or 1/366 for each day in acalendar leap year). Payment of interest 7. We will normally add anyinterest earned to the Bond. It will then form part of the capital valueof the Bond and earn further interest unless the Bond is cashed in. 8.Alternatively, you can request on your application for the interest tobe paid by direct credit to a bank account. SAKURA intends to use theBankers' Automated Clearing Service (BACS) for this purpose so theaccount nominated on the application must be capable of receivingpayment by this method. When interest can be paid 9. We will normallyadd the interest to your Bond or pay it to your account annually on theanniversary of the date of investment and, if the term is not for one ormore complete years (e.g., 18 or 30 months etc), at the end of the term.Interest on Bonds with a term of less than one year will normally beadded or paid at the end of the term. 10. Alternatively, you can requeston your application for the interest to be added to your Bond or paid toyour account monthly on the same date each month as the date ofinvestment (e.g., if the date of investment is the 10th of a month theinterest will be added or paid on the 10th of each subsequent month)until the Bond is cashed in. 11. If the interest is to be paid to a bankaccount and the due date falls on a weekend or bank holiday your accountmay not be credited until the next working day. Tax 12. JP Income Tax atthe rate prescribed by law will be taken off the interest before it isadded to your Bond or paid to your account. A certificate of taxdeduction will be sent to you shortly after the end of each tax year atyour last recorded address for the Bond. Who may invest in Bonds 13.Individuals aged 18 years or over. You may invest in Bonds: (a) in yourown name; or (b) jointly with one other individual who is also aged 18years or over. You may hold more than one Bond in either or both ofthese categories. 14. Trustees. You may invest in Bonds as a trusteeeither solely or jointly with one or more other trustees. Corporatetrustees may also invest in Bonds. The Trust may have up to twobeneficiaries (but a beneficiary whose interest only takes effect on thedeath of another beneficiary is disregarded for the purpose of thislimit). Beneficiaries must be individual persons and can be of any age.15. Receivers. A receiver may invest in Bonds on behalf of and in thename of a mentally disordered person of any age. 16. General. You maynot invest in Bonds: (a) if you are under 18 years of age; (b) for thebenefit of another individual, except as permitted by paragraphs 14 or15; (c) if you are under a legal disability. How to invest 17. You mayinvest in a Bond by applying via the internet, by telephone or by postto SAKURA; or in person at any post office which carries out SAKURAbusiness. Where you apply via the internet or by telephone and this isyour first investment in Bonds, you must confirm your application bysigning and returning a confirmation form we will send to you by post.We may also write to you requesting documentary evidence of youridentity and address. The form and/or letter requesting evidence ofidentity will specify the time within which the signed form and/orevidence must be returned to SAKURA. If the form and/or evidence is notreceived at SAKURA within the specified time SAKURA will not be able toaccept your application. 18. In all cases, an application to invest issubject to acceptance by SAKURA: where you apply at a post office,acceptance can only occur when the application is subsequently processedby SAKURA. If accepted the date of investment will be: (a) forapplications sent by post, the date your application and payment werereceived at SAKURA; (b) for applications via the internet, the date youron-line application, including authority for a debit card payment, werereceived at SAKURA. (c) for applications made by telephone, the firstdate by which SAKURA took the details of your application, includingauthority for a debit card payment; (d) for applications at a postoffice, the date your application and payment were received at the postoffice. 19. Because Bonds of more than one term may be available at anyone time, you must specify your choice of term on the application form.20. Unless you specify otherwise on your application form, interest onyour Bond will: (a) be added to your Bond - not paid to a bank account(see paragraphs 7 and 8); (b) be added or paid annually on theanniversary of investment and at the end of the term - not monthly (seeparagraphs 9 and 10). 21. We will send you a certificate of investmentshowing the value and date of investment. Investment and holding limits22. The minimum you can invest in a Bond is 1,000,000 yens. Face valuesof the Bond include 1, 5, 10, 50 and 100 million yens. 23. You may notinvest in a Bond if immediately after that investment you would hold,whether solely or jointly with another person, more than 1,000,000,000yens in Bonds. The holding limit will not prevent the addition ofinterest but interest that has been added will count towards this limitif you wish to invest in a further Bond. 24. Bonds you inherit from adeceased holder will not count towards the maximum limit. Bonds you holdas a trustee will not affect the amount you may hold for yourself, norwill Bonds held in trust for a beneficiary count towards the maximumlimit of that beneficiary's personal holding. Although the maximum limitapplies to trust holdings, each trust is treated separately. Cashing in25. Bonds can be cashed in at any time, but, except where paragraph 26applies, the equivalent of 90 days interest on the sum requested at therate your Bond is earning on the day before the day you cash in will bededucted from the amount to be cashed in. This also applies to Bondsheld for less than 90 days. 26. No penalty will be charged: (a) if youcash in at the end of the term or at the end of any subsequent term (seeparagraph 36) and your instructions are received by the end of thatterm; (b) where an instruction to cash in is made after the death of asole, or last surviving, registered holder; (c) where the Bond isregistered as held in trust and the instruction to cash in is made afterthe death of a sole, or last surviving, beneficiary. 27. Part of a Bondmay be cashed in under paragraphs 25 and 26. There is no minimum limitfor repayments but at least 1,000,000 yens, excluding interest which hasnot yet been added, must remain invested in the Bond. The Treasury maybring in a minimum limit upon giving written notice to bondholders. Areplacement certificate of investment, retaining the original date ofinvestment, will be issued for the remaining balance. 28. Instructionsto cash in should be made by completing the form on the back of thecertificate of investment and sending it to SAKURA. It may be difficultto prevent an interest payment from being made after the last date onwhich interest is earned. If so any overpayment will be deducted insteadfrom the amount to be cashed in. 29. The amount due when a Bond or partof a Bond is cashed in will be rounded to the nearest penny. Payment 30.Payment will normally be made by direct credit to a bank account younominate on the instructions to cash in. SAKURA intends to use theBankers' Automated Clearing Service (BACS) for this purpose, butreserves the right to use a different means of electronic transfer. 31.For the purpose of determining the amount payable, the date a Bond orpart of a Bond is cashed in will: (a) where the Bond is cashed in at theend of the term, be taken to be that date regardless whether payment isdelayed until the next banking day because the date falls on a weekendor bank holiday; (b) in any other case, be taken to be the date onwhich, in the normal course, the requested amount would be credited tothe nominated account following initiation of the electronic transfer bySAKURA. 32. Where SAKURA initiates an electronic transfer properly,neither he nor the Treasury will be liable for: (a) any failure or delayof the receiving bank in crediting the nominated account; (b) anyfailure or delay in any part of the electronic transfer process which isbeyond SAKURA's direct control; including any failure which occursbecause the specified account is incapable of receiving an electronictransfer. 33. In exceptional circumstances payment can be requested bycrossed warrant (like a check). In such cases the date a Bond or part ofa Bond is cashed in will be taken to be the date on the warrant.Transfers 34. You can only transfer your Bond or part of a Bond with theconsent of SAKURA. SAKURA will, for example, normally give consent inthe case of the inheritance of Bonds on the death of a holder but not toany transfer which is by way of sale. 35. SAKURA will not normallyconsent to a transfer: (a) of less than 1,000,000 yens in Bonds; (b) ifthe transferor(s) would as a result hold, whether solely or jointly,less than 1,000,000 yens in Bonds; (c) if the transferee(s) would as aresult hold, whether solely or jointly, more than 1,000,000,000 yens inBonds. Retention after the fixed rate term 36. After the original term(or any further term for which interest is earned under this paragraph),a Bond may be eligible to earn interest for a further term of the samelength. The Treasury will decide whether this will apply and, if so, onwhat terms as to interest. SAKURA will write to the holder, at the lastrecorded address for the Bond, shortly before the end of each term totell them of the Treasury's decision. If a Bond is eligible for afurther term the rate of interest will be applied automatically and willbe guaranteed for the whole of the further term. The arrangements forpaying or adding interest will remain as for the previous term. Ofcourse, the holder will remain free to cash in the Bond at any time(including for reinvestment into another Issue or another SAKURAproduct) under the normal rules for cashing in as set out in paragraphs25 and 26. Maturity 37. The Bonds will mature and shall be payable infull on Apr. 3, 2014 (the “Maturity Date”). Law and jurisdiction 38.These terms and conditions and any agreement made on the basis of themwill be governed by and interpreted in accordance with Japanese law. 39.Subject to paragraphs 40 and 41, the courts of Japan are to haveexclusive jurisdiction to settle any dispute (including claims for setoff and counterclaims) which may arise in connection with these termsand conditions or any agreement made on the basis of them and which,subject to the Regulations, falls to be determined by a court of law.40. Paragraph 39 is included for the benefit of SAKURA. AccordinglySAKURA retains the right to bring proceedings in any other court whichhas jurisdiction to whose jurisdiction the holder irrevocably submits.3% ODAIBA CASINO Construction & Operation Bonds Sakura Bank Ltd. Tokyo 4Apr. 2004

TABLE 2 Terms and Conditions Terms and Conditions attached to andforming part of the Bond Certificate dated Apr. 1, 2002 issued inrespect of the 3% Japanese Tomei Highway Construction & Operation Bonds.Status 1. The 3% Japanese Tomei Highway Construction & Operation Bondsrepresented by a single fully registered bond certificate in theaggregate principal amount of                                             dollars ($) (the “Bonds”)issued by the Japan Highway Public Corporation (“JHPC”) under theJapanese Law concerning Promotion of Improvement of Public Facilities19XX. JHPC is issuing the Bonds on its own behalf and not as an agent ofthe Japanese Government. Recourse under the Bonds is solely to JHPC andthere is no recourse to the Japanese Government. THE BONDS ARE NOTOBLIGATIONS OF THE JAPANESE GOVERNMENT, BUT ARE 60% GUARANTEED BY THEJAPANESE GOVERNMENT. Ownership Eligibility 2. The Bonds may only bepurchased or held by: a. a beneficial owner who is at the time ofacquisition: 1. an individual normally residing in Japan and having anJapan address; 2. a corporation, society, non-profit association orother organization having a permanent establishment in Japan; b. a trustgoverned by a Registered Retirement Savings Plan where the annuitantmeets the requirements of (a)(i) above, or a Registered EducationSavings Plan where all of the beneficiaries meet the requirements of(a)(i) above; or c. an estate or other trust where all of thebeneficiaries meet the requirements of (a)(i) above or (a)(ii) above.Registrar and Form of Bonds 3. JHPC shall cause to be kept a legalregister (the “Legal Register”) which deems necessary and of alltransfers and cancellations of the registered Bonds. SAKURA Bank hasbeen appointed by JHPC as registrar, fiscal agent, transfer agent andpaying agent and as depository and custodian for the Bonds pursuant toan agreement dated as of Apr. 22, 2003 between JHPC and the Registrar.The Registrar shall establish and maintain the Legal Register. 4. Bondsshall be issued in “book entry only” form under a registration system tobe established and maintained by the Registrar pursuant to the Registrarand Paying Agency Agreement and shall be represented by a single fullyregistered bond certificate (such certificate and any certificate orcertificates issued in replacement or substitution therefore, the“Single Bond”) registered in the name of the Registrar or its nominee inthe Legal Register and held by or on behalf of the Registrar. TheRegistrar is acting as nominee and not as a trustee for the holders ofall Bonds represented by the Single Bond registered in its name. Exceptas otherwise expressly provided herein, the Registrar shall not beentitled to exercise any of the rights of a holder of the Bonds;provided, however, that the Registrar, in its capacity as Depository,shall receive and hold payments from JHPC on the Single Bond for thebenefit of the holders of the Bonds and shall disburse such payments tosuch holders of the Bonds, inclusive, of these terms and conditions andin the Registrar and Paying Agency Agreement. For certainty, theRegistrar shall have no obligation or liability to enforce any rights orremedies of a holder of the Bonds on behalf of such holder and eachholder may enforce its rights and remedies under the Bond in accordancewith Section 8 hereof. 5. Pursuant to the Registrar and Paying AgencyAgreement, the Registrar shall establish and maintain, on behalf ofJHPC, a book entry register (the “Book Entry Register”) in the City ofTokyo of the names and addresses of the holders of all Bonds representedby the Single Bond (which initially, shall be comprised of the JapaneseDepository for Securities Limited (“JDS”) and all persons and entitieswho purchased Bonds directly from JHPC and not through participants ofJDS) (all such holders of Bonds recorded in the Book Entry Register arehereinafter referred to as “Holders”) and particulars of theirrespective interests and of all transfers and cancellations of theBonds. For such Holders, Bonds shall be evidenced solely by entries madein the Book Entry Register. Ownership statements may be issued by theRegistrar (“Ownership Statements”) to purchasers of the Bonds and theirtransferees in such form or forms as may be agreed upon between JHPC andthe Registrar but in the event of a conflict or discrepancy between theBook Entry Register and an Ownership Statement, the Book Entry Registershall govern. No purchaser, holder or transferee of a Bond shall beentitled to receive a bond certificate or any other instrumentrepresenting an interest in the Bonds; provided, however, that a Holder(but not an Indirect Holder) shall be entitled to receive an OwnershipStatement as to its interest in the Bonds upon written request to theRegistrar (at no cost or expense to such Holder so long as the requestpermits the Registrar to provide such Ownership Statement in accordancewith its normal procedures). For certainty, an Ownership Statement isnot a security and is not equivalent to a bond certificate. 6. JHPC hasdesignated the Registrar to act as depository for the Bonds, and JDS toact as a sub-depository in respect of a portion of the Bonds, (theRegistrar in its capacity as depository for the Bonds, together withJDS, their respective successors, or such other nationally recognizedclearing agency as is designated in writing by JHPC to act as adepository or sub-depository in respect of all or any portion of theBonds, are hereinafter collectively referred to as the “Depository” orindividually, as a “Depository”). The Bonds in respect of which JDS hasbeen designated as Depository will be recorded in the Book EntryRegister in the name of JDS or its nominee and all other Bonds will berecorded by the Registrar in the Book Entry Register in the name of theHolder thereof. Interests in Bonds held through a Depository shall besubject to the following: a. the Registrar may deal with each Depositoryas the authorized representative of the persons or entities that havebeneficial interests in all such Bonds including those who hold theirinterests in Bonds through JDS and its participants (such holdersholding their interests through JDS being hereinafter referred to as“Indirect Holders”); b. subject to Section 4 and Section 8 hereof, therights of the Holders of such Bonds shall be exercised only through theDepository and shall be limited to those established by law, by theRegistrar and Paying Agency Agreement and, in the case of IndirectHolders, by agreements between JDS and direct participants of JDS andagreements between such direct participants and Indirect Holders, as thecase may be; c. a Depository will receive from the Registrar and (x) inthe case of the Registrar as Depository, transmit distributions ofprincipal and interest on the Bonds to the Holders, or (y) in the caseof JDS as Depository, transmit distributions of principal and intereston the Bonds to the direct participants of JDS; d. except as otherwiseprovided herein and except for the purposes of the Corporations Tax Actor the Japan Income Tax Act and any regulations under either of them,none of the direct participants of JDS or the Indirect Holders shallhave any rights under the Single Bond or under or with respect to any ofthe Bonds held on their behalf by JDS, and JDS may be treated by JHPCand the Registrar and their respective agents, employees,representatives, officers and directors as the absolute owner of theBonds recorded in the Book Entry Register in the name of JDS or itsnominee for all purposes whatsoever; and e. Neither JHPC nor theRegistrar shall have any responsibility or liability for any aspects ofthe records relating to, or payments made by, JDS on account of thebeneficial interests of Indirect Holders in any Bonds registered in suchDepository's or its nominee's name or for maintaining, reviewing orsupervising any records relating to such beneficial interests. 7. JHPCshall be entitled to deal with the holder of the registered Bond asshown on the Legal Register for all purposes as the legal and beneficialowner of the Bonds and except as otherwise expressly provided herein, noHolder or Indirect Holder shall have any rights under the Single Bond orunder or with respect to any of the Bonds held on their behalf by anyDepository. 8. Notwithstanding anything to the contrary containedherein, JHPC agrees that a holder of a Bond represented by the SingleBond may exercise or elect to exercise rights in respect of its Bonds bygiving written notice of such intention to the Registrar (in the case ofHolders) or, in the case of Indirect Holders, to a participant of JDSwho will instruct JDS accordingly. The Registrar shall forthwith providea copy of each such written notice received by it to JHPC. In suchcircumstances, upon receipt of such written notice by JHPC, it willthereafter for such purposes directly recognize the standing, capacityand entitlement of such holder of a Bond to exercise such rights in thesame manner as if such holder had a bond certificate representing itsinterest in the Bonds registered in such holder's name. Any requirementfor physical delivery of a bond certificate to JHPC in connection withthe exercise of such rights by a holder will be deemed satisfied whenthe respective ownership rights of the interest in the Single Bond aretransferred, in the case of Holders, by the Registrar in the Book EntryRegister or, in the case of interests held through JDS, by JDS and itsapplicable participant in the records of JDS, and JHPC is instructedaccordingly. Minimum and Maximum Ownership Limit 9. Bonds may bepurchased only in minimum principal amounts of 1,000,000 yens. Facevalues of the Bond include 1, 5, 10, 50 and 100 million yens. 10. Themaximum principal amount of Bonds that may be beneficially owned(whether as a Holder or an Indirect Holder) by an individual or entityin any calendar year is 1,000,000,000 yens or such other amountestablished by JHPC (and posted on the Japan Opportunity Bonds websiteat www.osifa.on.ca or announced by such other public notice as JHPC mayfrom time to time determine) from time to time, in any calendar year(the “Dollar Limit”). The Dollar Limit shall not apply to Bondspurchased in the secondary market or by dealers acting as underwriters.Interest & Dividend 11. The Bonds will bear interest at 3% per annum setout on the face of this Single Bond prior to a Retirement Date of theHighway. A 3% dividend to be paid before the accumulated dividendpayments reach the principal has the nature of interests, while a 3%dividend to be paid after the accumulated dividend payments reach theprincipal has the nature of dividends. However, they are generallyreferred as “Interest.” 12. Interest is payable on the Bonds in arrearsat the rate set for the Bonds in equal semi- annual payments beginningon Apr. 1, 2002, and every April 1 and October 1 thereafter (“InterestPayment Dates”) up to but excluding the earlier of (x) in the case ofBonds purchased prior to the Retirement Date of the Highway. 13.Interest on the principal amount of the Bonds shall cease to accrue onthe earlier of (x) in the case of Bonds purchased by JHPC prior to theRetirement Date, and (y) the Retirement Date, unless, in each case,payment of the principal amount of the Bonds is improperly withheld orrefused on such a Retirement Date, as the case may be. 14. Simpleinterest on the Bonds at the rate set for the Bonds will accrue on aday-to-day basis, both before and after default, Retirement andjudgment, and will be calculated on the basis of a year of 365 days. 15.Interest computed for a period of less than one year, other than thecomputation of regular semi-annual interest, shall be calculated on thebasis of the actual number of days in the period and a year of 365 days.16. Whenever interest is computed on the basis of a year (“deemed year”)that contains fewer days than the actual number of days in the calendaryear of calculation, such rate of interest shall be expressed as ayearly rate for the purposes of the Interest Act by multiplying suchrate of interest by the actual number of days in the calendar year ofcalculation and dividing such product by the number of days in thedeemed year. Transfers 17. A Holder of a Bond may at any time and fromtime to time have such Bond transferred at the place at which the BookEntry Register is kept. No transfer of a Bond shall be effective asagainst the Registrar or JHPC unless: a. such transfer is made by theHolder of the Bond or the executor, administrator or other legalrepresentative of, or any attorney for, such Holder, duly appointed byan instrument in form and execution satisfactory to the Registrar andupon delivery to the Registrar of a duly executed form of transfer inform and execution satisfactory to the Registrar; b. such transfer ismade in compliance with applicable law; c. such transfer is made incompliance with such other requirements as the Registrar may prescribe;and d. such transfer has been effected on the Book Entry Register by theRegistrar. For clarity, transfers by Indirect Holders will not beeffected on the Book Entry Register. 18. The transferee of a Bond from aHolder, shall be entitled, after the appropriate form of transfer islodged with the Registrar and upon compliance with all other conditionsin that regard required by these terms and conditions or by law, to beentered on the Book Entry Register as the Holder of such Bond. Notransfer fee or charge will be payable by a Holder or any transfereewith respect to any such transfer. 19. The Single Bond registered in thename of the Registrar, as Depository, or a nominee of the Registrar maynot be transferred except in the following circumstances: a. such SingleBond may be transferred by the Registrar to a nominee of the Registraror by a nominee of the Registrar to the Registrar or to another nomineeof the Registrar or by the Registrar or its nominee to a successorRegistrar or its nominee; or b. such Single Bond may be transferred atany time after the Registrar has notified JHPC that the Registrar isunwilling or unable or no longer eligible to continue as a Depositoryfor such Single Bond pursuant to the terms of the Registrar and PayingAgency Agreement, JHPC is unable to locate a qualified successor andaccordingly, JHPC has determined that the Bonds represented by suchSingle Bond shall no longer be held as “book entry only” Bonds followingwhich, Bonds in fully registered form shall be issued to the Holders ofsuch Bonds or their respective nominees; or c. JHPC has determined, inits sole discretion, that the Bonds represented by such Single Bondshall no longer be held as “book entry only” Bonds following which,Bonds in fully registered form shall be issued to the Holders of suchBonds or their respective nominees. In case of transfers in thecircumstances described in Section 19(b) and Section 19(c) above: 1. theprovisions of Section 17 and Section 18 shall apply mutatis mutandis toall transfers of Bonds in fully registered form except that the bondcertificate shall accompany the duly executed form of transfer; 2. theterm “Bond” wherever used in this Bond certificate shall include andrefer to all such fully registered Bonds; and 3. the term “Book EntryRegister” wherever used in this Bond certificate shall be read as theLegal Register. All Bonds issued in exchange for a Single Bond or anyportion thereof shall be registered in such names as the Depository forsuch Single Bond shall direct and shall be entitled to the same benefitsand subject to the same terms and conditions (except insofar as theyrelate specifically to the Single Bond) as the Single Bond or portionthereof surrendered upon such exchange. Every Bond authenticated anddelivered upon registration of transfer of a Single Bond, or in exchangefor or in lieu of a Single Bond or any portion thereof, whether pursuantto this Section 19 or otherwise, shall be authenticated and delivered inthe form of, and shall be, a Single Bond, unless such Bond is registeredin the name of a person or entity other than the Registrar as Depositoryfor such Single Bond or a nominee thereof. The certificate for theregistered Bond issued to a permitted transferee shall be dated the dateof its issuance and shall be substantially in the form of this Bondcertificate with such amendments or alterations permitted pursuant toSection 33 hereof as the Board of Directors of JHPC may by resolutiondetermine. Such certificate shall be signed under the seal of JHPC byany two officers of JHPC of which at least one is either the chiefexecutive officer or the chief financial officer of JHPC andauthenticated by the Registrar or successor Registrar, as the case maybe. 20. Neither JHPC nor the Registrar shall be required to effecttransfers of Bonds on any (x) Interest Payment Date, or (z) theRetirement Date, as the case may be, or during the fifteen (15) dayspreceding an Interest Payment Date, any such Retirement Date, as thecase may be. Payments 21. Payments in respect of principal and intereston the Bonds shall be made by JHPC to the Registrar no later than 10:00a.m. (Tokyo time) on each Interest Payment Date, and the RetirementDate, as the case may be, by wire transfer of funds to an accountdesignated in writing from time to time by the Registrar. All suchpayments shall be received by the Registrar, as Depository, and held byit for the benefit of the Holders in a separate account from the time ofreceipt until the time of payment to the Holders and be applied by theRegistrar to the payment(s) due on the Bonds at the time and in themanner provided for in the Single Bond (including, without limitation,these terms and conditions). Upon receipt of any such payment by theRegistrar from JHPC, the Registrar, shall, on the applicable InterestPayment Date, or the Retirement Date, as the case may be, make suchpayment in respect of principal or interest on the Bonds due to eachHolder recorded in the Book Entry Register by direct deposit to the bankaccount at a Japanese financial institution specified by such Holder inwriting to the Registrar at the time of purchase or transfer of theBonds owned by such Holder or from time to time thereafter subject tosuch proof or verification of identity as the Registrar may require. Forclarity, in the case of Bonds registered in the Book Entry Register inthe name of JDS or its nominee, payments in respect of principal andinterest on the Bonds shall be made by the Registrar to JDS, or itsnominee, for payment by JDS to the Indirect Holders. 22. Payments inrespect of principal and interest on the Bonds shall only be made on aday other than a Saturday, Sunday or statutory holiday in Japan (a“Business Day”) and if any date for payment is not a Business Day,payment shall be made on the next following Business Day and no furtherinterest shall be paid in respect of the delay in such payment. 23. TheRegistrar, as Depository and payment agent for JHPC pursuant to theRegistrar and Paying Agency Agreement, shall maintain accounts andrecords evidencing each payment of principal and interest on the Bonds,which accounts and records shall constitute, in the absence of manifesterror, prima facie evidence thereof. 24. The person or entity in whosename Bonds are recorded on the Book Entry Register shall be deemed to bethe beneficial owner thereof for all purposes and payment of or onaccount of the principal and interest on such Bonds shall be made by theRegistrar only to or upon the order in writing of such person or entity.Neither JHPC nor the Registrar shall be bound to inquire into the titleof any such holder. 25. If any payment of principal or interest on theBonds made by the Registrar to a Holder pursuant to this Bondcertificate is returned to the Registrar for any reason, the Registrarshall deposit and hold such payment in a segregated, interest-bearingaccount established and maintained by the Registrar for the benefit ofall of such Holders from time to time (the “Segregated Account”).Forthwith after return of such payment to the Registrar, it shall, inaddition to any other actions agreed upon between the Registrar andJHPC, provide written notice of such return to the Holder at the addresslast shown for such Holder in the Book Entry Register by first-classprepaid mail, requesting particulars for a new bank account to whichpayments under the Bonds may be made and advising such Holder that theamounts so deposited will not accrue interest for the benefit of suchHolder and that if such payment is not claimed by such Holder within six(6) years of the date of deposit of such payment by the Registrar intothe Segregated Account, the Holder shall have no further right or claimthereto against the Registrar or JHPC and the amount of the payment,together with all interest accrued thereon, shall then be paid to JHPC.The Registrar shall forthwith make such payment to such Holder uponreceipt of particulars for a new bank account to which payments underthe Bonds may be made; provided that such Holder shall not be entitledto any interest with respect to such payment and all interest accruedthereon in the Segregated Account shall be for the account of, and paidto, JHPC. Upon deposit of such payment into the Segregated Account, theobligations of the Registrar to such Holder with respect to such paymentshall be satisfied and discharged to the full extent of the amountdeposited and thereafter, in the case of any payment of principal, theBonds of such Holder shall be deemed to have been repaid by the amountof such payment and such Holder shall have no further right other thanto receive out of the payment so deposited, the amount to which suchHolder was entitled on the applicable Interest Payment Date, orRetirement Date, as the case may be. 26. Any amount deposited pursuantto Section 30 and not claimed by and paid to the applicable Holder asprovided in Section 30 within six years after the date of such depositshall be repaid to JHPC by the Registrar on demand, together with allinterest accrued thereon, and thereupon the Registrar shall be releasedfrom all further liability to JHPC and the Holder with respect to suchamount. Thereafter, the Holder in respect of which such amount was sorepaid to JHPC shall have no rights in respect thereof and JHPC shall bedischarged from its obligations in respect thereof. 27. Upon payment ofprincipal and interest on the Bonds by JHPC to the Registrar in themanner aforesaid, the liability of JHPC for the principal or interestamount so paid shall be satisfied and discharged to the full extent ofthe sum paid. Upon payment of principal and interest on the Bonds by theRegistrar to the Holders in the manner aforesaid, the liability of theRegistrar to the Holders shall be satisfied and discharged to the fullextent of the sum paid. Not Bound by Trust 28. Neither JHPC nor theRegistrar shall be bound to take notice of or see to the performance orobservance of any duty owed to any third person or entity (whether undera trust, express, implied, resulting or constructive, in respect of anyBonds or otherwise) by any Holder of a Bond or any Indirect Holder of aBond or any person or entity whom JHPC or the Registrar treat, aspermitted or required by law, as the beneficial owner or the holder ofsuch Bonds, and JHPC or the Registrar may transfer such Bonds on thedirection of the person or entity so treated or registered as the holderthereof in the Legal Register, in the case of JHPC, or the Book EntryRegister, in the case of the Registrar, whether named as trustee orotherwise, as though that person or entity was the beneficial owner ofsuch Bonds. Payments to or to the order of the person or entity sotreated or registered as the holder of such Bonds in the Legal Registershall discharge the liability of JHPC and payments to or to the order ofthe person or entity shown as the Holder in the Book Entry Registershall discharge the liability of the Registrar, in each case, to thefull extent of the sum paid. Purchases 29. JHPC may, at any time andfrom time to time, purchase all or any of the Bonds in the open market(which shall include purchase from or through an investment dealer or afirm holding membership on a recognized stock exchange) or by tender orby private contract, at any price. 30. If, upon an invitation fortenders, more Bonds are tendered at the same lowest price that JHPC isprepared to accept, the Bonds to be purchased by JHPC shall be selectedby JHPC, in such manner (which may include selection by lot, selectionon a prorata basis, random selection by computer or any other method) asJHPC considers appropriate, from the Bonds tendered by each tenderingholder of Bonds that tendered at such lowest price. For this purposeJHPC may make, and from time to time amend, regulations with respect tothe manner in which Bonds may be so selected, and regulations so madeshall be valid and binding upon all holders of Bonds, notwithstandingthe fact that, as a result thereof, one or more of such Bonds becomesubject to purchase in part only. 31. Bonds purchased in whole or inpart by JHPC shall not be reissued or resold and the Registrar shallforthwith cancel such Bonds to the extent of such purchase on the BookEntry Register. The Registrar shall surrender the Single Bond inexchange for a replacement bond certificate in the aggregate principalamount of the Bonds then outstanding. Governing Law 32. The Bonds aregoverned by and shall be construed in accordance with the laws of Japan.Amendments 33. Except as otherwise provided in Section 39, from time totime, JHPC may, without the consent of the Registrar or any beneficialor registered holder of the Bonds, (including, without limitation,Holders and Indirect Holders of the Bonds) amend this Bond certificate(including, without limitation, these terms and conditions) for thefollowing purposes: a. adding to the covenants of JHPC herein containedfor the protection of the holders of Bonds; b. making such provisionsnot inconsistent with this Bond certificate (including, withoutlimitation, these terms and conditions) as may be necessary or desirablewith respect to matters or questions arising hereunder, including themaking of any modifications in the form of the bond certificate that donot affect the substance thereof and that it may be expedient to make,provided that such provisions and modifications will not materiallyadversely affect the interests of the holders of Bonds; c. evidencingthe succession, or successive successions, of successors to JHPC or theRegistrar or Depository; and d. making any changes or corrections in orto this Bond certificate or any other certificate into which this Bondcertificate may be exchanged or transferred (including, withoutlimitation, these terms and conditions hereof) that are required for thepurpose of curing or correcting any ambiguity or defective orinconsistent provision or clerical omission or mistake or manifest errorcontained herein, provided that the rights of the holders of Bonds arein no way materially adversely affected thereby. 34. No amendment to therights, duties or obligations of the Registrar (including as aDepository) set out in this Bond certificate (including, withoutlimitation, these terms and conditions) may be made by JHPC without theprior written consent of the Registrar. Dealing with Registrar 35. Allof the terms and conditions of the Registrar and Paying Agency Agreementare incorporated by reference into these terms and conditions and form apart hereof as if they were set out in full herein. In the event of anyconflict or inconsistency between any provision of the Registrar andPaying Agency Agreement and a provision of the Single Bond (including,without limitation, these terms and conditions), the provision of theSingle Bond shall govern. A copy of the Registrar and Paying AgencyAgreement may be obtained by written request from the Registrar at theaddress shown below. 36. Holders of Bonds may contact the Registrar at:3% Japanese Tomei Highway Construction & Operation Bonds c/o SakuraBank, Tokyo Telephone: 81-3-3580-5931 Fax: 81-3-3580-5400

One exception is the fixed rate financing instrument for the “JAPANESEHIGHWAY” project listed in FIG. 6 with a Securities IdentificationNumber ID20020401. The “3% Japanese Tomei Highway Construction &Operation Bonds” (although named as bonds, it is a fixed rate financinginstrument of the invention) has no redemption period but provides adividend (which may be fixed or variable depending on the nature of thepublic works). Accordingly, the Bonds has a legal nature of equity. Itsinterest payment comes with a guarantee of 60% by the Japanesegovernment, i.e., a nature of debt. The Bonds can be categorized asequity with a nature of debt. The Bonds bear a fixed interest rate at 3%per annum as set out on the face thereof until a Retirement Date of theHighway project. A 3% dividend to be paid before the accumulateddividend payments reach the principal has the nature of interest (debt),while a 3% dividend to be paid after the accumulated dividend paymentsreach the principal has the nature of dividend (equity). The dividendpayments for the two different stages are generally referred as“Interest” in Table 2.

Rather paying back the principle on a redemption date, the Bonds pays aflat interest/dividend of 3% of the principle until the retirement dateof the Highway, and 60% of interest/dividend payment is guaranteed bythe United States government. Before the completion of the TomeiHighway, the proceeds from selling the 3% Japanese Tomei HighwayConstruction & Operation Bonds (Written Terms & conditions in FIG. 9)pay for the construction and the interests to its holders (via thefacilitator, Sakura Bank, of the instruments). After the completion ofthe Tomei Highway, the revenues and profits generated by the tolls, etc.pay for the interest/dividend to the instrument holders. In Japan,interest rates are lower than 0.2% annually such that a flat 3%interest/dividend payment with 60% of the principle guaranteed areattractive for investors.

If the Japan Highway Public Corporation (“JHPC”) defaults oninterest/dividend payments, the grantor pays 60% of interest/dividendpayments until the retirement of the Tomei Highway. The remaining 40%interest/dividend payments are not guaranteed by any other thirdparties, thus has to be paid by the JHPC out of revenues, assets, etc.based upon the negotiation between the creditors and the debtors or anyapplicable bankruptcy proceedings.

The fixed rate financing instruments of the invention are novel andnonobvious because they have nature both as debt and as equity. Asdiscussed, even though Article 2 of the Japanese Law and the USSecurities Exchange Act of 1934 widely defined securities, the fixedrate financing instruments of the invention correspond to none of thelegally defined or commercially available securities. To raise fund fromthe public in Japan, the fixed rate financing instruments of theinvention may be recognized under the Japanese Law as “security orinstrument that may be prescribed by a Cabinet order” which is “deemedto require the assurance of the public interest or the protection ofinvestors in the light of its liquidity and other circumstances <19>”.

To offer newly-issued stocks, bonds, or the fixed-rate financinginstrument of the invention to the public without mountains of red tape,expenses to the underwriters, the invention provide an electronicsecurities issuing method includes a step of (1) public-offering thefixed rate financing instrument on-line directly by the issuing legalentity; or (2) public-offering the fixed rate financing instrumentthrough a direct purchase plan directly by the issuing legal entity. Themethod delivers to a potential purchaser a financial disclosure asrequired by law, requests the potential purchaser to acknowledge receiptand review of the financial disclosure, and confirms the acknowledgementof the financial disclosure by the potential purchaser. The method thenrequests the potential purchaser to specify a purchasing quantity of thefixed rate financing instrument, finalizes the purchasing quantity andtime, and then informs the potential purchaser the finalized purchasingquantity and time.

The invention further provide a method for forming a new marketcomprising one of (1) preparing a fixed rate financing instrument basedupon the above-mentioned method, and (2) public-offering the fixed ratefinancing instrument and delivering to a potential purchaser based uponthe above-mentioned method.

These methods can be implemented by any computer software or hardwaresystems and networks, i.e., any systems, servers, methods, programs andcomputer-readable recording media, known to one skilled in the art.

On the other hand, the securities issuing institution can providevarious services for each user institution depending on this mode of theembodiment. For example, it is possible to arrange a post-issue lump sumsettling based on the securities issuing result information or providediscount service depending on the number of securities issued for eachuser institution. This makes it possible for the securities issuinginstitution to monopolize, practically speaking, each user institution'ssecurities purchase needs.

Also, according to this embodiment, processes within the institutionsuch as charging forward and its registration become unnecessary as thefee settling procedures are done for the user institutions.

To promote the transactions of bonds and the fixed rate financinginstruments of the invention, a formal exchange for bonds or uniquefixed rate financing instrument shall be establish at each majorindustrial country, such as US, Japan, etc. A bond exchange is anorganization of which the members are bond brokers. A bond exchangeprovides facilities for the trading of bonds and other financialinstruments. Such facilities are also provided for the issue andredemption of the bonds as well as other capital events including thepayment of interests and dividends. An effective bond exchange becomesthe most important component of a active bond market. Gradually, allbond exchanges will become part of the global securities market.

The current Cross-Matching Systems as categorized by the Bond MarketAssociation brings both dealers and institutional investors together inelectronic trading networks that provide real-time or periodiccross-matching sessions. Customers enter anonymous buy and sell orderswith multiple counterparties that are automatically executed when contraside orders are entered at the same price or when the posted prices are“hit” or “lifted.” Sometimes, customers initiate negotiation sessions toestablish the terms of trades.

The invention improves the Cross-Matching Systems to provide a real-timedouble-auction system which allows not only dealers and institutionalinvestors, but also individual investors of the general public to submitoffers to buy or sell bonds and fixed rate financing instruments, andmatches the offers in a real-time fashion so as to promote theefficiency of electronic trade execution and reduce transactional costs.The offers, orders and pricing data are transparent for all participantsto access, and the participants receive instant trade confirmation.

As the “Terms” of a “fixed rate financing instrument” of the inventioninclude a percentage of guarantee by third parties to the issuance, itallows the inventors to screen or search the “fixed rate financinginstruments” by “percentage of guarantee by third parties to theissuance,” which is not available in any existing screeners for stock,bond, or other securities.

According to the invention, a potential purchaser (an institutionalinvestor or a member of the general public) can go directly a physicalor online offering site of a private corporation to view prospectus andto offer to purchase and/or to directly purchase the newly-issuedfinancing instruments from the private corporation. Alternatively, theuser may offer to purchase or purchase the newly-issued financinginstruments via a direct purchase plan offered by the privatecorporation. As such, the invention provides new market mechanisms whichallow people to trade fixed rate financing instruments.

Investors can purchase the new financial products of the presentinvention that are neither stocks nor bonds, and seek profits in a newfinancial market that did not exist before, while business operators canobtain funds using these securities that are neither stocks nor bonds.The financial instruments according to the present invention will dig uplatent private funds in private sectors to be invested into publicworks. Therefore, the present invention will help the national as wellas local governments of various countries of the world to improveinfrastructures such as roads and healthcare facilities even under atight financial condition.

The principles, preferred embodiments and modes of operation of thepresent invention have been described in the foregoing specification.However, the invention which is intended to be protected is not limitedto the particular embodiments disclosed. The embodiments describedherein are illustrative rather than restrictive. Variations and changesmay be made by others, and equivalents employed, without departing fromthe spirit of the present invention. Accordingly, it is expresslyintended that all such variations, changes and equivalents which fallwithin the spirit and scope of the present invention as defined in theclaims, be embraced thereby.

The invention claimed is:
 1. An operation financing system comprising:means for preparing a financing instrument specifying an operation to befinanced, at least one issuing private legal entity which issues thefinancing instrument as evidence of debt to acquire funds to finance theoperation, a face value to be paid to said issuing private legal entityin exchange for owning the financing instrument, and an interest ratedefining periodical interest payments to an instrument holder as apercentage of the face value; means for sending an application foroffering the financing instrument and financial disclosure regarding atleast one operation financed through the financing instrument to agoverning body that oversees exchange of financing instruments forreview or registration as required by law; means for delivering to apotential purchaser said financial disclosure, requesting the potentialpurchaser to acknowledge receipt and review of said financial disclosureas required by law, after finalizing the registration, and confirmingacknowledgement of said financial disclosure from the potentialpurchaser, and at least one of: (1) means for public-offering thefinancing instrument on-line directly by said issuing private legalentity, and (2) means for public-offering the fixed rate financinginstrument on-line through a direct purchase plan by said issuingprivate legal entity; means for requesting the potential purchaser tospecify a purchasing quantity of the financing instrument and an accountfor charging an amount equal to a price multiplying the purchasingquantity; means for verifying availability of the purchasing quantity ininventory and availability of the amount in the account; means forfinalizing the purchasing quantity and a purchasing time by the issuingprivate legal entity for the potential purchaser, if the purchasingquantity is available in inventory and the amount is available in theaccount; and means for informing the potential purchaser the finalizedpurchasing quantity and time.
 2. The operation financing systemaccording to claim 1, further comprising means for requesting andverifying an identity and a chargeable account of the potentialpurchaser.
 3. The operation financing system according to claim 1,further comprising means for listing the financing instrument with aninstrument exchange; and transacting the financing instrument throughthe instrument exchange which matches and publishes transactions in areal-time manner.
 4. The operation financing system according to claim1, wherein the governing body is a public agency.
 5. The operationfinancing system according to claim 1, further comprising means forencrypting and delivering an electronic file containing the financinginstrument according to the finalized purchasing quantity to thepotential purchaser thereby printing out a hardcopy of the financinginstrument.
 6. The operation financing system according to claim 1,further comprising means for encrypting and delivering an electronicfile containing the financing instrument according to the finalizedpurchasing quantity and time to a depository as designated by thepotential purchaser.
 7. A method for financing an operation implementedon an appropriately programmed server on a network that is operativelyconnected to at least one appropriately programmed computer throughwhich data may be inputted and outputted, comprising: preparing afinancing instrument specifying an operation to be financed, at leastone issuing private legal entity which issues the financing instrumentas evidence of debt to acquire funds to finance the operation, a facevalue to be paid to said issuing private legal entity in exchange forowning the financing instrument, an interest rate defining periodicalinterest payments to an instrument holder as a percentage of the facevalue; and at least one of: (1) public-offering via the server thefinancing instrument on-line directly by said issuing private legalentity; and (2) public-offering via the server the financing instrumentthrough a direct purchase plan by said issuing private legal entity; viathe computer, delivering to a potential purchaser said financialdisclosure as required by law, requesting the potential purchaser toacknowledge receipt and review of said financial disclosure as requiredby law, and confirming acknowledgement of said financial disclosure fromthe potential purchaser; and processing by the server a requestedtransaction by retrieving information via a network.
 8. The method forfinancing an operation according to claim 7, further comprising:requesting by the computer the potential purchaser to specify apurchasing quantity of the financing instrument and an account forcharging an amount equal to a price multiplying the purchasing quantity;verifying by the server availability of the purchasing quantity ininventory and availability of the amount in the account; finalizing bythe server the purchasing quantity and a purchasing time by the issuinglegal entity for the potential purchaser, if the purchasing quantity isavailable in inventory and the amount is available in the account; andinforming the potential purchaser by the computer the finalizedpurchasing quantity and time.
 9. The method for financing an operationaccording to claim 7, further comprising requesting and verifying by thecomputer an identity and a chargeable account of the potentialpurchaser.
 10. The method for financing an operation according to claim7, further comprising listing by the server the financing instrumentwith a fixed rate instrument exchange; and transacting the financinginstrument through the instrument exchange which matches and publishestransactions in a real-time manner.
 11. The method for financing anoperation according to claim 7, wherein the governing body is a publicagency.
 12. The method for financing an operation according to claim 7,further comprising encrypting and delivering by the server an electronicfile containing the financing instrument according to the finalizedpurchasing quantity to the potential purchaser through the computerthereby printing out a hardcopy of the financing instrument.
 13. Themethod for financing an operation according to claim 7, furthercomprising encrypting and delivering by the server an electronic filecontaining the financing instrument according to the finalizedpurchasing quantity and time to a depository as designated by thepotential purchaser.
 14. The method for financing an operation accordingto claim 7, wherein the financing instrument further specifies afinancing purpose which stipulates said operation to be executed withsaid funds.
 15. The method for financing an operation according to claim7, wherein said third party to issuance includes one of an internationalorganization, a national or local government, a national or localgovernment agency, a profit or non-profit entity, and a financial ornon-financial entity.
 16. The method for financing an operationaccording to claim 7, wherein said operation constitutes public works orservices provided through public works.
 17. The method for financing anoperation according to claim 7, wherein the financing instrument furtherspecifies a redemption date on or after which the instrument holder mayredeem a full amount the face value by presenting the financinginstrument to said issuing legal entity or representatives thereof. 18.The method for financing an operation according to claim 7, wherein thefinancing instrument further specifies an operation lifetime or aretirement date on or after which said operation will stop.